Authentication & Security

The Four Trends Shaping Everyday Commerce

In 2015, 205 million US citizens, or nearly two-thirds of the population, shopped online. Many of these transactions were powered by FinTech companies responsible for ensuring that all information passing through these rails were kept safe. Most consumers have little-to-no knowledge of how payments work, but that doesn’t stop the industry from thriving. The payments industry is mostly traditional players, like banks, who account for roughly 95% of the market share. The flexibility and agility of FinTech companies have created an increasingly competitive landscape, pushing the industry forward faster than ever before.

With over 123 billion non-cash transactions in 2013, the United States continues to lead the global market in alternative payments, with a growth rate of 4.7% from the previous year. In response, the payment industry has surged with innovation and growth, bringing new financial technologies to both merchants and consumers.

As the payments industry works to build out these solutions, we see trends such as fraud prevention & security, one-stop-shop or omnichannel, conversion-focused and vertical-specific solutions continue to drive the industry.

1. Fraud Prevention & Security

Handling sensitive payment information is a risk that most companies don’t want to take. While some FinTech companies can offer a higher level of PCI compliance with built-in fraud tools to mitigate risk, there is still a possibility for a data breach. Not only are data breaches becoming more common in industry headlines, but the AFP 2013 Electronic Payment Survey found that the typical organization receives 50% of its B2B payments by one of the least secure payment options – checks. Although checks dominate the B2B payment landscape, they have one of the greatest risks of fraud.

To escape risky payment types like checks, many companies are turning online. Companies are turning to tools like tokenization to keep their online payment information from being targeted or exposed. Some companies are taking it one step further to protect their customer’s information with network level tokenization. Network level tokenization translates the credit card information when it reaches the payment network, opposed to it being translated at the payment processor. The next wave of tokenization has already emerged in Apple Pay, and other businesses have begun to take advantage of the added security.

2. One-Stop Shop or Omnichannel

Investment in FinTech has increased to $19 billion in 2015, from $1.8 billion in 2010. As the market floods with investment, new solutions are helping to automate menial tasks and solve new pains. While technology is surging, merchants are looking for one solution to meet their in-store, in-app and online needs. True omnichannel also provides merchants insight with centralized reporting for all channels. Merchants are opting out of maintaining five different accounts for the ease of one solution.

About 71% of in-store shoppers who use smartphones to research products and services before they buy say their device, and online experience, have become more important than their in-store experience. It’s no surprise that merchants who adopt omnichannel strategies will be able to compete better in the marketplace by capitalizing on multiple shopping channels and revenue streams consumers have already come to expect.

3. Conversion Focused

Shopping cart abandonment rate varies by survey but is typically around 70–80% and today’s Listrak’s six-month average abandonment rate is 75%. While there are some simple techniques that merchants can do to help increase conversion, such as A/B testing, optimizing for mobile, one click, and third-party wallets, merchants are always looking for solutions that promise higher conversions. Smart payment forms that verify data upon entry, and are responsive to their environment, are becoming table stakes, and the FinTech companies that offer these more advanced solutions are finding an eager market.  

In 2015, over $74 billion in goods and services was bought via mobile devices in the United States. FinTech companies are building solutions that not only convert across devices but are automatically updated at no downtime or inconvenience to the merchant. By dedicating more resources to increasing conversions, FinTech companies are paving the way to a more streamlined marketplace.

4. Tailored Solutions

The giants in the industry are creating broad product suites that can be easily tailored and customized by the merchant. For example, merchants and customers prefer a seamless payment experience with payment forms and invoices that take on the merchant’s branding. For good reason, payment forms that are embedded onto a merchant’s website will see a higher conversion rate than pushing a customer to a third-party site.  

SaaS and cloud-based business are a huge business, with revenues projected to be $32.8 billion in 2016. The fastest growing SaaS businesses are growing through cross-selling and up-sells. Tailoring a solution to the specific needs of the SaaS, and offering an end-to-end solution has helped to drive this success. For example, you could argue that a reservation system could be used universally, but a summer camp has different reservation requirements than a boutique hotel. SaaS businesses have succeeded by being increasingly tailored to their specific target market. FinTech companies are helping SaaS business upsell by integrating tailored payment solutions directly into the software, allowing the summer camp reservation software to also process the camp fees.

2016 has been an exciting year to be in the payments industry. As more investment flows in to help support and grow the industry, FinTech companies can help meet the problems of tomorrow today. While new solutions are being announced daily, the ones that will succeed are secure, leverage multiple channels, convert, and are tailored to specific markets. FinTech has subvertly revolutionized the way customers and business interact. With no signs of slowing down, FinTech will continue to shape the future of commerce.

Ryan Stewart

Ryan Stewart is Head of Product Development, North America for Beanstream, a Bambora Company. He is passionate about payment products and also the dynamic payments industry, where he has lead the rollout and launch of many products, including Beanstream USA. Ryan has been in the payments industry for over 15 years.

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